Chinese Real Estate Tycoon Forced to Sell Assets to Pay Off Debt

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In a shocking revelation, China’s Securities Regulatory Commission (CSRC) recently announced that real estate conglomerate Evergrande, owned by billionaire Hui Ka Yan, inflated its revenue by over $78 billion USD (equivalent to 1.9 quadrillion Vietnamese đồng) over the span of two years, leading to its current bankruptcy crisis.

Hengda, Evergrande’s key real estate subsidiary, falsified its 2019 revenue by approximately 214 billion Chinese yuan (around $29.7 billion USD), accounting for half of the total revenue. This was done by recognizing unaccounted revenue. In 2020, the company continued this practice by falsifying an additional 350 billion Chinese yuan (equivalent to 79% of the total annual revenue).

The CSRC accuses Evergrande’s founder and former chairman, Hui Ka Yan, of directly instructing employees to inflate Hengda’s financial data, labeling his actions as “extremely serious” and unlawful.

As a result, Hui has been fined 47 million Chinese yuan and permanently banned from participating in the capital market. Hengda, on the other hand, has been fined 4.18 billion Chinese yuan. Former CEO Xia Haijun and CFO Pan Darong also faced corresponding penalties.

To mitigate the consequences, Hui is currently selling off his assets. One of his mansions in Hong Kong is currently up for sale through Savills Plc.

The Fall of an Empire

Hui Ka Yan, once hailed as the richest real estate magnate in Asia, once held an extensive empire that encompassed various businesses, including real estate and electric vehicles.

Evergrande was once the largest real estate company in China. However, the empire crumbled as regulatory agencies tightened credit markets while the economy slowed down and the Covid-19 pandemic hindered sales revenue, squeezing the company’s cash flow.

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According to the CSRC, Hengda also exaggerated profits by 63% and 87% for 2019 and 2020, respectively.

Since September 2023, Hui has been under police control and subjected to mandatory restrictive measures due to suspected criminal activities. As of now, his whereabouts remain unknown, although there have been no criminal charges against him.

Hui’s fortune plummeted from a peak of $42 billion USD in 2017 to approximately $1 billion USD in 2021, when Evergrande defaulted on its debts. The company’s stock plummeted and eventually ceased trading.

In January 2024, Evergrande received a court order for asset liquidation in Hong Kong, marking the largest real estate collapse in the three-year-long crisis.

Source: Business Today